The increase was $121,606 which was exactly what I forecasted. My investment returns suffered due to an unexpected loss of Lending Club notes ($5,000 expected gain vs. $3,983 actual loss) caused by the scandal surrounding CEO departure, and slightly lower returns on DLI Fund performance (12% forecast vs. 10.89% actual). Over the next few years, I expect my salary to remain flat while the passive income continues to grow.

Internal Rate of Return (IRR): 7.98%

Account

Allocation

IRR (TTM)

IRR (TOT)

Lending Club

4.66%

(4.16%)

5.71%

Direct Lending Income Fund

84.16%

10.75%

10.73%

Groundfloor

0.55%

6.86%

iFunding

10.62%

3.60%

Total

100%

7.98%

8.75%

Allocating a large portion of my fixed income portfolio in Lending Club notes was a big mistake.The under-performance of the lower-grade loans (particularly grade E-G) is hurting my overall investment returns. I have stopped automated reinvesting for the foreseeable future and continue winding down all Lending Club accounts. The discrepancy between an actual return and an expected has continued to worsen, leading me to look for different asset classes as my IRR declines.

Backdoor Roth IRA

I considered Vanguard or Fidelity for my annual backdoor Roth IRA contributions, but I decided to stay with Lending Club invest with Groundfloor. I also started winding down Lending Club IRAs.

Portfolio Assessment

YieldStreet works with litigation finance originators to create diversified portfolios of pre-settlement advances on personal injury cases. The target return is 12-15% over 24-36 month term. I have been parking my cash in DLI Fund as an alternative to stashing money in a high yield savings account until I am ready to make a long-term commitment with other asset classes. Now that the return of the fund is going to fall in the high-single digit range, I am thinking to shift my portfolio allocation to litigation finance. The difference between the two returns is no longer negligible when one has been in steady decline.

Credit Card Arbitrage

An estimated total redemption in DLI Fund will be $750,000 over the next 12 months. $350,000 will go toward credit card repayments. The third round of credit card arbitrage investment will take place in mid-2018.

401(k) Contribution Only Up To The Match

I stop maxing out a 401(k) plan through my company. My employer matches 125% up to 6 percent of my salary for a maximum $10,000 per year. I will contribute only up to $8,000.